France’s software development sector has been showing strong, sustained growth, but it is still not well structured to meet the challenge of breaking into new markets in Europe and worldwide.
At the third ‘Top 250’ French Software Publishers and Developers evening hosted by sector federation Syntec Numérique in Paris on 15 October, multinational professional services firm Ernst & Young presented a report including observations and forecasts for the French software market. The main conclusion is very clear-cut: French software development companies are doing well, even extremely well, judging by how the market has expanded since 2010. With accumulated turnover of a little over €8 billion and an increase of 10% in jobs created since 2011, software development is showing a strong hand during an economic period when many other sectors of the French economy have been hard hit. On top of the actual volume increase, the speed of progress is something that should give French software publishers a lot of confidence. Turnover has risen by an accumulated 12% since 2011, and since 2010 there has been an overall increase of more than 20%. Software development now accounts for over 50,000 jobs, a figure which should continue to swell in the coming years, given that 70% of the firms polled by EY said they were planning to recruit.
Growth varies according to sub-sector
‘Horizontal’ providers – i.e. software publishers and developers that produce general software which can theoretically be applied to any activity – are doing well, showing an accumulated increase of 15% in turnover since 2010, but it is the specialised, business-oriented firms and the video games developers that are driving the main growth in the French software sector, with growth of close to 23%. Moreover a closer look at the figures reveals not only fairly strict segmentation among companies but also a real imbalance within the sector. Among the top 250 attending the event, there were a couple of industry giants who come out top in terms of both size and profitability: namely 3D design software company Dassault Systèmes in the specific business solutions category; and video game publisher and developer Ubisoft in the games and mass market software category. Both these companies achieved turnover more than five times greater than the number two firm in their respective categories. Among the business-based solutions providers, totalling 175 well-known developers, and the games publishers – numbering 18 – there is a high concentration of business with the sub-sector leaders. Overall, only 5% of the development firms account for 60% of the software produced in these various markets.
Investing strongly in the future
Growth in France’s software development industry has gone hand-in-hand with a consistent policy of investing in the future of the industry. In 2012 close to a quarter of all sector employees were working in Research and Development, with a budget of over a billion euros. The main barrier to growth for French software developers is certainly not a lack of dynamism. It is rather, according to Olivier Ezratty, an innovation strategy advisor, due to a failure to internationalise and get into foreign markets. Foreign business is growing, accounting for 20 - 60% of turnover, depending on the company. However, the industry in France is highly fragmented and still too reliant on a few leading firms. “The software development sector in France is a bipolar industry, with a huge amount of technical expertise, but seriously lacking in the marketing and sales skills to exploit its full potential,” argues Olivier Ezratty.